Category Archives: Macroeconomic policy

Will the Eurozone Be Able to Align National Interests?

Yves here. We ran an earlier post by Ashoda Mody, he argued that Eurozone was failing in resolving its recurring crises successfully. That is a coded way of saying that the odds of breakup are rising. Needless to say, that view elicited a lot of commentary from his readers. Mody addresses their reactions and objection below.


BIS Warns About Destabilizing Low Interest Rates

The financial media is all atwitter (no pun intended) over the Bank of International Settlement’s just released annual report, since it shook a stern finger at central banks for keeping super low interest rates and warned them about the difficulty of renormalizing without kicking up a lot of upheaval.


Randy Wray: Modern Monetary Theory – The Basics

How economists that are otherwise sympathetic to modern monetary theory nevertheless misconstrue some of its fundamental observations. For instance, those like Paul Krugman who are generally of the Keynesian persuasion like MMT’s “deficit owl” approach. Krugman acts as if he would really like to stop worrying about the deficit so that he could advocate an “as much as it takes” approach to government spending. The problem is that he just cannot quite get a handle on the monetary operations that are required. Won’t government run out? What, is government going to create money “out of thin air”? Where will all the money come from?


Philip Pilkington: ‘Uncertainty’ in Contemporary DSGE Modelling – Not Even Wrong

Yves here. This post might seem a smidge technical for generalist readers, but have faith. Pilkington uses DSGE models, a widely used type of macroeconomic forecasting model, to demonstrate the prevalence of intellectual bankruptcy in economics. As he writes,

The level of scholarship in contemporary economics is absolutely shocking. Contemporary theorists just pick up on buzzwords that they hear in the media and then assume that they have understood them. Then they scramble to build some arcane model or other in which they assure others that they have captured the meaning of the buzzword in question. The mathematics then becomes a cloak hiding the fact that they have never bothered to actually think through the concepts they are using.

This is frighteningly similar to something I wrote:

That was one of the scary things I finally figured out during my last visit to DC. I thought people constructed policy first and then reduced it to soundbites to sell it. I came to realize that most people in DC reason from soundbites (as in their analysis and policy design is constructed from soundbites from the get-go).


Bill Black: The EU Center-Right and Ultra-Right’s Continuing War on the People of the EU

The New York Times has provided us with an invaluable column about the interactions of the EU’s rightist and ultra-rightest parties. It is invaluable because it is (unintentionally) so revealing about the EU’s right and ultra-right parties and the NYT’s inability to understand either the EU economic or political crises. The NYT article illustrates its points by presenting a tale entitled “A German Voice, Hans-Olaf Henkel, Calls for Euro’s Abolition.” It treats Henkel, an open racist and austerian, as a reputable figure, apparently because he is wealthy.


Mathew D. Rose: When European Politicians Cannot Read the Handwriting on the Wall

Despite the alarming results of the European elections last week, Angela Merkel remained unflinching. That is a cause for concern. European politicians believe the solution to voter ire is better messaging, as opposed to a change in policy.


Bill Black: Spain’s “Stimulus” Plan – Austerity, Rebranded

Spain’s conservative government, eager to change the media’s emphasis on its repudiation in recent EU elections, has launched a media campaign stressing its adoption of an aggressive “stimulus” program. But once you get past the hype, this new program is the same old failed austerity snake oil.